Investors remain bearish by a factor of two-to-one. That’s down from recent readings but still elevated, and is possibly a sign that the market is nearing a bottom.

According to a recent survey from the American Association of Individual investors 47% of investors were bearish, meaning they expected stocks to keep falling, for the week ending June 29. That’s more than twice the 23% portion of investors who were bullish.

That’s a relatively high level of bearishness. On average 38% of investors surveyed by the AAII are bullish with 31% bearish. In other words, investors mostly tilt towards being bullish, on average.

However, its also worth noting that the level of bearishness has declined from the previous reading. For the week ending June 22, and the week ended June 15 investors surveyed were around three times as bearish as they were bullish.

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While this is a useful indicator of a potential market bottom, it still needs to be confirmed by the beginning of an upward trend, says JC Parets, a technical analysts and founder of AllStarCharts.com.

“Well, sentiment is a great way to put the current market environment into perspective. It sets the stage,” he writes in a recent report. “But for timing, sentiment isn’t the greatest.”

What needs to happen is there needs to be evidence of the beginning of an upward trend in the stock market. Or put another way, the SPDR S&P 500 exchange-traded fund should have an upward trajectory.

But how will we know when it is doing that.

“That’s where trend analysis and sector rotation come into play,” Parets says.

In the past, Parets has said that sector rotation is the life-blood of a bull market. When investors switch from one sector to another, often under appreciated, sector and keep doing that then we have the makings of a bull market.

However, it still seems as as we are in a sell-everything (except gold and oil) for the time being.

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